Advance payments from customers are recorded in the Down Payment account at the time of invoice issuance and are transferred to Sales upon receipt of the customer's Surah Terima Berita Acara (certificate of acceptance). As a result, a mismatch occurs between the invoice amount issued for the month (A/R recorded amount) and the accounting Sales figure. Accounting System in Indonesia The cloudification of accounting systems is advancing in Indonesia, with the three major local cloud systemsAccurate, Zahir, and Jurnalleading the market. However, in reality, it is said that fewer than 8% of domestic companies have implemented accounting systems. This is why new cloud-based accounting systems continue to be launched in what might seem like an already saturated Indonesian market. It suggests that both domestic and international IT startups see significant potential for cloud accounting systems to expand their market share locally. In Indonesia, automated journal entries due to the widespread use of accounting systems have become commonplace, and over the ... 続きを見る
Deposit (Prepaid Funds) and Down Payment (Advance Payment)
In Indonesia, when signing a contract for an apartment or purchasing a car, a contract fee (Tanda Jadi) is required. This is akin to a deposit (prepaid funds) demanded in the form of a credit card or cash before checking into a hotel, abbreviated as DP (Dé Pé).
In Indonesia, the DP (Dé Pé) as a deposit when purchasing a service corresponds to an Advanced Payment in accounting terms. From the service provider’s perspective, it is treated as a Down Payment.
"Down" means "to reduce liability," which is an expression from the buyer’s perspective. However, in the service provider’s accounting, it is a liability to the customer, while the advance payment to the service provider constitutes a receivable.
Receipt of Down Payment from Customers
Advance payments from customers are recorded in the Down Payment account at the time of invoice issuance and transferred to Sales upon receipt of the customer’s certificate of acceptance (Surah Terima Berita Acara). However, the journal entry method differs between the Completion Basis and the Percentage of Completion Basis.
- Issuing an invoice for an advance payment of 100, equivalent to 50% of the order price
A receivable (A/R) arises for the customer, and the Down Payment is recorded in the credit account using the transaction type "advance payment" as the key.- (Debit) A/R 100 (Credit) Down Payment 100
- Receiving a certificate of acceptance for 25% completion from the customer
Percentage of Completion Basis:- (Debit) Down Payment 50 (Credit) Sales 50
Completion Basis:
- No entry
- Receiving a certificate of acceptance for 50% completion from the customer
Percentage of Completion Basis:- (Debit) Down Payment 50 (Credit) Sales 50
Completion Basis:
- (Debit) Down Payment 100 (Credit) Sales 100
- Receiving a certificate of acceptance for 100% completion from the customer
Both Percentage of Completion Basis and Completion Basis are the same:- (Debit) A/R 100 (Credit) Sales 100
Since the advance payment is recorded as Down Payment at the time of invoice issuance and transferred to Sales upon completion of the work, a mismatch occurs between the invoice amount issued for the month (A/R recorded amount) and the accounting Sales figure.
Payment of Advanced Payment to Vendors
Essentially, this involves journal entries that are the reverse pattern of Down Payment. However, when money is transferred in advance without an invoice and a lump-sum invoice is received upon service completion, no A/P arises. In such cases, the accounting system manages it through the general ledger (G/L).
- Paying an advance payment of 100 to a vendor
Since no invoice is received and no liability arises, Advanced Payment is recorded directly in the G/L.- (Debit) Advanced Payment 100 (Credit) Bank 100
- Recording A/P upon invoice arrival
A/P is recorded upon receipt of the full invoice, including the advance payment.- (Debit) Service Expense 500 (Credit) A/P 500
- Offset processing
The advance payment and A/P are offset.- (Debit) A/P 100 (Credit) Advanced Payment 100